Estate Planning can be a complex issue for many families and can be further complicated when a business is part of the mix.
A great deal of energy and focus is given through one's lifetime to develop, enhance and protect your wealth; planning of your estate requires equal focus. You may have a Will, but is it current? Does it adequately meet your needs? Are the needs of your business considered? Have you experienced any life changing events, such as marriage, divorce, becoming a parent and/or grandparent?’
Estate Planning involves not only deciding how your assets are distributed on death, but should seek to ensure the correct financial structures are in place so that your family interests and those of the beneficiaries are protected. Communication between you, your accountant, solicitor and financial adviser is paramount.
It is important to be aware that not every asset can be distributed via your Will. For example, your superannuation – often one’s largest asset apart from the family home – is not considered an estate asset. Therefore instruction in the form of Binding Death Nomination or Reversionary elections must be placed on your superannuation account to ensure it is distributed in line with your intentions.
The management of taxation plays an integral role in the Estate Planning process. For example, the payment of superannuation death benefits can have significant tax consequences. An adult child, who receives an inheritance in the form of your superannuation, could be liable for considerable tax payable, so adequate review of these consequences and tax management can benefit all parties.
As a business owner you need to establish a business succession plan to ensure the ongoing viability of the business and to protect the value and control of your interests. Where more than one family is included, a buy/sell agreement provides an option contract for the continuing business owners to purchase the outgoing owner’s share of the business in the event of death, permanent disability or in the case of a trauma event where the outgoing owner cannot return to work. Consideration must also be given to who will assume control of private companies or trust structures in your absence.
Another area requiring specialised focus is the inclusion of a Power of Attorney (POA), which allows you to nominate another person to act on your behalf. Implementing POAs provides peace of mind that important transactions (personal and or business) will continue to be carried out by an individual who you have chosen and in whom you hold confidence. An Enduring Power of Attorney provides a comprehensive solution, as the powers remain intact even after the principal has lost their mental and physical capabilities.
It is a common misconception that married couples have a legal power to act for each other should one lose capacity; this is not the case and can have a devastating effect on a family’s financial security.
Estate planning is complex and requires specialist advice; we encourage you to seek counsel from your trusted advisers. It is a difficult and troubling topic to discuss with family and business partners, but if your plan is addressed and implemented early, you will leave a legacy others will cherish.
Geoff Steer is a Founding Partner of Matthews Steer Chartered Accountants. Geoff was recently ranked one of Australia’s top 10 financial advisors by the AFR Smart Investor Magazine’s 2011 Masterclass.
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